Voluntary Taxation

Back in June 2002, well before it became a cause de jour for the conservative set, I proposed doing away with all non-voluntary taxation by replacing income and all other taxes with a consumption tax. Since Hastert's musings in his autobiography, and Rep. Linder's introduction of HR 25, both of which suggest such a system, there have been a number of commentaries on the proposal, nearly all of them negative. However, they are negative because they assume (a) that government expenditures will stay roughly the same (thus pushing the proposed sales tax percentage to extraordinary levels); and (b) they assume that the sales tax will fall on ALL consumption which they claim, correctly, would impose a significant regressive taxation on the poor and lower middle class.

For example, in a review of possible Bush second term policies, J.K. Galbraith muses on the proposal, concluding that "the whole tax burden will then fall on the middle class, on working American, and on the poor." In a more detailed analysis, the Institute on Taxation and Exconomic Policy calculates that, under HR 25, "the bottom 80 percent of taxpayers would face much higher taxes under a sales tax. Nationwide, these tax increases would average about $3,200 a year." And this is after taking into account the rebate system that HR 25 proposes to deal with regressivity.

I agree that simply replacing the current taxation revenue with an across-the-board sales tax is a proposal without hope. Luckily, that is not the solution that I proposed.

Before I recap the details of my own proposal, let me make it clear that in an anarchistic society there would be no taxation of any sort. There would, no doubt, be voluntary levies -- probably in goods and labour -- contributed by the voluntary members of various mutual aid groups to move certain projects ahead. However, this would be on an ad-hoc basis, without coercion, and would not be considered by most to be a form of taxation at all. The following proposal is designed for a transitional state between capitalism and anarchism.

This is what I wrote in 2002, and I see little need to change the basic structure proposed:

The basic principles for the tax scheme are that it should be essentially voluntary, and concerned with ensuring equal opportunities for all. Therefore, I would propose the elimination of all personal and corporate income taxes as they violate by their nature the voluntary aspect of taxation. I propose to replace the revenue with an all-inclusive sales tax on all goods and services with a few, well-defined exceptions (the figures below represent Vancouver costs of living and could be adjusted as required):

• all foods
• shelter (to $12,000/year rent or the first $200,000 of purchase)
• medical and dental services
• educational services
• financial services to $500/year

The sales tax should be a single percentage across all categories of goods and services in order to reduce accounting and bureaucratic requirements.

My tax plan would also include a 100% estate or death tax. Those who approve of giving advantages to those who have not earned them but have merely acquired them through accident of birth (closet monarchists, all of them) can insert some other percentage into their model.

Finally, I would also grant the government revenues from criminal fines, all of which would be levied (above a certain minimum) based on the criminal's net worth. The purpose of this is to end the regressive nature of the cost of criminality (the current arrangement allows, say, the same $1,000 fine on a millionaire -- for whom it means nothing and therefore no deterence -- and a welfare gasper -- for whom it may mean starvation or worse.)

That would be it for government revenues -- sales taxes, death taxes, criminal fines. The use of the sales tax for the bulk of government revenues brings a great deal of volunteerism to the matter: The exceptions provide an important and necessary break for those goods and services which can be described as the necessities of life; above that, the more I choose to buy, the more taxes I choose to pay.

On the other side of the ledger, also to the good, the simplicity of the scheme allows for huge bureaucratic savings in both administration and compliance.

It assumes that significant portions of current governmental activity have been done away with, returned to the people for their own handling. Those portions of government activity that do remain should be easily categorised into line items that can be shown to have a direct bearing on the level of the sales tax. In this way, the people are enabled to make decisions about what sections of government can be further cut to reducde the level of taxation. Conversely, any additional work to be performed by the government can be easily calculated as an addition to the sales tax. In other words, the cost of a government service will be immediately and directly calculable -- and the people can make their judgements on whether to go ahead with it on that basis. It is one thing to say that a government program costs $600 million -- an abstraction at best; it is quite another to say that program x will cause a rise in the sales tax by 1%.

In a capitalist system where the government bureaucracy acts as a nanny on so many issues, taxation of some sort is inevitable, as will be resistance to such taxation. The sales tax that I propose will allow the taxation system to operate on a voluntary basis, thus achieving considerably greater support and compliance.